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Dubai Wins Bidding Battle for P.& O.

LONDON, Feb. 10 - Dubai appears to have won a bidding battle for control of Peninsular & Oriental Steam Navigation, the British shipping company, completing the emirate's rapid transformation from a local port operator to one of the world's giants.

PSA International of Singapore said unexpectedly on Friday that it would drop out of the fight for P.& O., as the British company is known, after considering Dubai's £3.88 billion ($6.8 billon) bid made Jan. 26.

"For PSA to pay more than this price would not be compatible with commercial business sense and PSA's future success," PSA said in a statement to the London Stock Exchange on Friday.

The board of P.& O. has already approved the bid, made by DP World of Dubai, and its shareholders are expected to approve it at a meeting on Monday.

"We're pleased by this development and remain encouraged by the P.& O. board's unanimous recommendation to its shareholders of our offer," said the DP World chairman, Sultan Ahmed bin Sulayem, who works directly for the crown prince of Dubai, Sheikh Mohammed bin Rashid al-Maktoum. "It would be inappropriate for us to say anything more ahead of the shareholder vote," he said.

Port industry ownership is increasingly moving out of European and American hands, as state-controlled entities like DP and PSA pay to buy publicly traded competitors, hoping to reap the benefits from strong global trade. In the future, these large companies are only going to get more market share, analysts predict.

Port companies like PSA, which is backed by the Singapore government, or Hutchison Whampoa, which is part of a giant conglomerate, can use their parents' deep pockets to pursue deals that are too expensive for their publicly traded competition, said Neil Davidson, a container ports analyst at Drewry Shipping Consultants in London. "They can take a strategic view, rather than thinking about shareholder value," he said.

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In 1999, Dubai started to expand from its home ports of Rashid and Jebel Ali into other countries from India to Romania. After the acquisition closes, DP World will handle about 33 million containers, just over 9 percent of the world's total.

This is the second time that DP World has beat out PSA on a deal. In December 2004, the Dubai company purchased the port business of the American rail company CSX for just over $1 billion.

Despite the rapid growth of industry leaders like DP World, there is currently little fear that the top companies will put the squeeze on the shipping industry or manufacturers. The port industry is still relatively diversified, with the top 10 port companies controlling about 50 percent of the total capacity. Some big port companies, meanwhile, are owned by shipping lines, and small independent port company start-ups are common.

DP World will become one of the world's top three port companies after the deal closes.

Dubai has been eager to diversify from oil revenues as its reserves of crude decline and has been pouring money into projects like real estate development and creating a new financial market. Sultan bin Sulayem is also chairman of Nakheel, a real estate company developing the Palm, which is creating three man-made palm-shaped islands off the coast of Dubai.

PSA's retreat on Friday caps several months of gamesmanship by the Singapore and Dubai companies. DP World bid £3.3 billion for P.& O. in November, a 46 percent increase from the British company's trading price before markets began speculating about a deal in October. PSA followed that bid in January with a £3.5 billion offer, which was topped by DP World's £3.88 billion offer weeks later.